Home Buying in Arnold>Question Details

Tony Bramham, Home Buyer in Arnold, CA

how low an offer should I make?

Asked by Tony Bramham, Arnold, CA Sun Feb 21, 2010

What is an average offer on a cabin listed for 299000

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Answers

8
Every situation wlll vary.

It seems like a few years ago one could offer alot less than currently.
Discuss with your Realtor to find out if the home is priced right to begin with. If so, it's wise to not take a chance and offer close to full price. If the home is overpriced - ask your Realtrto find sales comparables to demonstrate that a lower price is reasonable. As a Realtor, I can pull up sales comps which will show the average difference between asking price and the actual sales price.
That gap is shrinking from over 10% a few years ago to less than 3% and that is a very general statement.
0 votes Thank Flag Link Sat Jan 18, 2014
Apparently, Don is a realtor and not a chemist or mathematician.

Water boils at 212 degree Fahrenheit. The average of two pots of water at 212 degrees Fahrenheit and 20 degrees Fahrenheit is 116 degrees Fahrenheit.

-Brad
0 votes Thank Flag Link Tue Mar 30, 2010
Hi Tony,
Cabins in Arnold, CA are generally selling for 8-15% lower than asking price. For example, since Dec. 1, 2010, these are four closings: List price,$299-Sale price $280; List price, $299-Sale price $275; List price $279-Sale price $245; List price $275-Sale price $255. I would assume that these settlement prices were negotiated up from a lower offer. Of course it will depend on how long the property has been on the market and how motivated the sellers are. Good luck.
Jo Ann Stump
0 votes Thank Flag Link Mon Mar 1, 2010
With all due respect Don, I first referred to Alan May's answer, which already takes into account the market value of the property. The reason for my caution on insulting the seller is due directly to my experience. And while I agree with most of what you said as well. I stand by my original comment as informational only to the buyer. I have witnessed this on more than one occassion and I believe the buyer should be fully informed in the event he or she was not aware of that.
0 votes Thank Flag Link Sun Feb 21, 2010
There's no formula or set percentage. Here's the reason:

There's no relationship between the asking price and the real value of a property. Just because a cabin is priced at $299,000, doesn't mean that's any reflection of its value. For "true value," we're talking about what the home is worth based on comps--what other similar homes have sold for recently.

In the case of your question, suppose there are 3 cabins in the same area priced at $299,000. But the homes aren't all the same. One, based on comps, really is only worth $250,000. But maybe the owner is greedy. Or maybe the owner owes $280,000 on a mortgage but needs to sell and break even. Or maybe it's a FSBO who doesn't have access to recent comps. Whatever the issue, that first cabin is only worth $250,000.

The second cabin is worth $299,000. It's been properly priced. Possibly a Realtor ran the comps, showed them to the homeowner, and the homeowner decided to put it on the market for that price. Or maybe a FSBO did the research and came to the same conclusion.

The third cabin is really worth $360,000. But perhaps the owners are getting a divorce and just want to sell. Or maybe it's an estate sale, and the children of the deceased parent just want to sell. That happens.

So, in the case of the overpriced home, even a moderate reduction from the listing price would end up in you overpaying. In the second case, the home is fairly priced. Maybe you can get it for less, but odds are someone will come in right around the asking price. And in the third case, you'd probably want to offer as much as (if not more than) the asking price.

So, asking price is no indication of the value of the home, nor is it any guide to what you should offer.

And while you'll see some statistics saying that "homes in ______ are sold for 96% of the asking price," that may be correct but totally irrelevant. First, those are averages. You're dealing with a specific home. The specific home you're interested in may be overpriced by 4% . . . . or 10% . . . . or 20%. Or it may be underpriced. Tell you what. Get two pots of water. Put ice cubes in one so that the temperature is around 20 degrees. Put the other on the stove until it's boiling. Plunge one hand into each pot. How's it feel? What? Not so good. Why, the average temperature is a warm 120 degrees. That's the average.

Second, that 96% is totally misleading. It won't reflect any seller concessions, like 3% to help with closing costs. So that 96% actually may have resulted in a net to the seller of 93% of list.

Third, 96% of what? Suppose the cabin you're looking at started off at $360,000. Then it was reduced to $330,000. Then to $315,000. Sure, the selling price MIGHT be 96% of $315,000. But that's certainly not 96% of the original listing price.

One final point: I disagree with the caution about "insulting the seller." You're not a mind reader. You have no idea what might or might not insult the seller. Some sellers will be insulted by an offer just a penny less than they're asking. Others will be delighted at any offer, even one perhaps 20% below the list price. It's not your job, nor is within your ability, to determine what might go through the seller's mind when he/she receives your offer. Your only consideration is to make an offer that works for you. Recognize that an offer that's close to the asking price has a better likelihood of being accepted. But that's irrelevant. What matters is making an offer that works for you and that is no greater than the property is actually worth.

So: Determine what the property is really worth in today's market. Then pay no more than that amount. You probably should offer less. That's how you do it.

Hope that helps.
0 votes Thank Flag Link Sun Feb 21, 2010
Don Tepper, Real Estate Pro in Fairfax, VA
MVP'08
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There is no standard as to how low--what is your agent suggesting--have you looked at recently closed similar properties in the immediate area, if so what does the data suggest--and repairs, are they extensive, cosmetic, etc. Keep in mind that a home is worth what someone is willing to pay for it; it doesn’t matter what the seller needs or potential buyers can afford to spend, market conditions do matter. Is the property priced on target for today's market--if priced slightly lower multiple bids could come into play.
0 votes Thank Flag Link Sun Feb 21, 2010
Tony,

I agree with Alan 100%. And in addition, I'd like to add the following: If you are working with a seller as opposed to a bank, and you low ball too low, you need to know and understand that you may insult the seller and they may not wish to counter. I have had a number of buyers that were under the impression that they could low ball an offer, but "always come back". Understand that a seller, in the State of Wisconsin anyway, does not have to sell to you even if you offer over the asking price. So I would take Alan's advice and get the facts on what a fair price would be and go from there.
0 votes Thank Flag Link Sun Feb 21, 2010
tony, there is no "average" offer, whether we're talking about a cabin for $299,000 or a mansion on the beach for $2,999,999.

There is no magic percentage of the list price, nor any set "deduction" where you should begin. What you need to do, is some research to determine what the property is really worth... it's current market value... and then offer accordingly to arrive at something close (or under) that number.

This is where a good local real estate agent can be a great help, because they generally KNOW your local market, and the current market values and can counsel you accordingly.

Good luck.
0 votes Thank Flag Link Sun Feb 21, 2010
Alan May, Real Estate Pro in Evanston, IL
MVP'08
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